* Obama: Keystone pipeline must not exacerbate carbon pollution
* Republicans say president's plan hurts economy, kills jobs
* Court challenges ahead
By Jeff Mason and Roberta Rampton
WASHINGTON, June 25 (Reuters) - President Barack Obama tried to revive his stalled climate change agenda on Tuesday, promising new rules to cut carbon emissions from U.S. power plants and other domestic actions including support for renewable energy.
Obama also signaled he would block construction of the Keystone XL oil pipeline from Canada if it contributed to climate change. That does not mean the project is doomed, however. A State Department report, which Obama could reference, has said the pipeline would not change the outlook for carbon emissions because the development of Canada's oil sands would continue whether it is approved or not.
Canada weighed in on Obama's remarks, saying it did not think there would be a net increase in carbon emissions if the proposed pipeline from the Alberta oil sands to Texas is built, according to the country's natural resources minister.
Obama's long-awaited climate plan, detailed in a speech at Georgetown University, drew criticism from the coal industry, which would be hit hard by carbon limits, and Republicans, who accused the Democratic president of advancing policies that harm the economy and kill jobs. Environmentalists largely cheered the proposals, though some said the moves did not go far enough.
Obama's first-term attempt to reduce climate-warming carbon emissions in a "cap and trade" system was thwarted by Congress, and his administration's long process of studying whether to approve the Keystone XL pipeline has raised hackles from business groups and Republican critics.
With Congress unlikely to pass climate legislation, Obama said his administration would set rules using its executive authority.
"We limit the amount of toxic chemicals like mercury and sulfur and arsenic in our air or our water, but power plants can still dump unlimited amounts of carbon pollution into the air for free," Obama said.
"That's not right. That's not safe. And it needs to stop."
Obama said he had directed the Environmental Protection Agency to craft new emissions rules for thousands of power plants, the bulk of which burn coal and which account for roughly one-third of U.S. greenhouse gas emissions.
Share prices for major U.S. coal mining companies stabilized on Tuesday after tumbling on Monday, in some cases to multi-year lows, in anticipation of the White House plan.
KEYSTONE XL PIPELINE SIGNAL?
Environmental activists welcomed Obama's speech, while Republicans raised economic concerns.
"It's tantamount to kicking the ladder out from beneath the feet of many Americans struggling in today's economy," said Senate Minority Leader Mitch McConnell, who planned to talk to Obama about his concerns at a meeting at the White House.
The president's unexpected comments on TransCanada Corp's Keystone XL pipeline drew a mixed response as well.
A decision to approve or reject the pipeline is expected later this year or in early 2014.
"Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution," Obama said. "The net effects of the pipeline's impact on our climate will be absolutely critical to determining whether this project is allowed to go forward," he said.
Keystone XL supporters and foes heard what they wanted in Obama's remarks.
"Based on the lengthy review by the State Department, construction of the pipeline would not have a significant environmental impact," said Brendan Buck, a spokesman for Republican Speaker of the House of Representatives John Boehner. "It's time to sign off on Keystone and put Americans to work."
Bill McKibben, a leading activist against the project, said Obama had set an appropriate standard with his remarks and called that "encouraging news," while environmentalist Tom Steyer hailed "the Keystone death knell."
Some observers have worried that a strong push for new climate change measures would be used by the White House to offset an eventual approval of the controversial pipeline.
In its draft environmental impact study in March the State Department found that the project would not have an impact on climate because the oil sands from which the oil would be extracted would make it to market whether or not the pipeline was approved. The EPA has questioned that finding, and the two agencies will need to come to an agreement before the final report is sent to Obama for his decision.
COURT CHALLENGES AHEAD
The pipeline aside, Obama's administration faces a long fight over his power plant proposals. The EPA is routinely challenged in court, both by industry groups seeking to quash rules and by green groups trying to push the agency to set tougher standards. Attorneys general from four coal-dependent states made it clear that they would fight back against "overreaching regulations."
The new rules on existing power plants, which Obama wants finalized by June 2015, could be tied up in court for years.
"Challenges defining standards for existing power plants mean that delays are likely, exacerbating uncertainties for utilities attempting compliance with other power plant regulations," said research firm Eurasia Group in a note.
Senator Joe Manchin, a Democrat from West Virginia, the No. 2 U.S. coal mining state after Wyoming, said Obama had "declared a war on coal," and the industry said the rules threatened its viability.
"If the Obama administration fails to recognize the environmental progress the industry has made and continues to adopt more regulations, coal power could cease to exist, which would be devastating for our economy," said Mike Duncan, president of the American Coalition for Clean Coal Electricity.
Ann Carlson, faculty director of the Emmett Center on Climate Change and the Environment at UCLA, was unimpressed.
"All Obama has done is tell his Environmental Protection Agency to issue rules that are already required under the terms of a settlement EPA entered into after being sued for missing deadlines," Carlson wrote in a blog post.
Obama's allies abroad were watching closely. The president said Washington would lead the world in talks to fight climate change and reiterated his pledge to reduce U.S. greenhouse gas emissions by roughly 17 percent below 2005 levels by 2020.
The European Union said it wanted more than words:
"Internationally, the White House plan contains a number of good intentions which have now to be translated into more concrete action," said EU climate commissioner Connie Hedegaard.